EUROPEAN LAW ON COMPETITION

18.02.2020 Tuesday (First class)

bernardus.smulders@ec.europa.eu

Introduction

Subject of competition law has grown at an exponential rate respondent to economic

thinking and behaviour and developments on a global scale.
There are more than 100 systems of competition law worldwide. Especially the EU
competition law system is in most cases the standard.
Competition law is concerned with protecting the state of competition between
enterprises to the benefit of consumers.
Competition means a struggle for superiority and in the commercial world this means
a striving for the custom and business of people in the marketplace to the detriment of other
players in the market. It is a process of rivalry between firms seeking to win customers.
The history of EU Competition law. Basic rules were enshrined already in the
founding treaties back in the ‘50s and not a word has changed despite numerous modifications.
The EEC Treaty in particular was concluded and ratified in the ‘50s, and at that time only one
member state had national competition law (Germany – WW2). It was believed that big
industrial conglomerates should not be resurrected as they played a big role within the Third
Reich. In the USA, the same fear led to the adoption of the Sherman Act in 1890 because
conglomerates had a tendency to exploit their power not only to the detriment of their rivals
but also customers and even influencing politics and becoming a threat to democracy.
In the 20th century, a lot of countries had suspicions about the competitive markets and
favoured state planning because of the Cold War between socialism and capitalism. The role
of the state, however, has been reducing steadily after the end of the Cold War with
privatisation, opening up of international trade, creation of the WTO, and de-regulation of the
markets. The impact of this was an unprecedented amount of economic growth and prosperity,
but also to a certain extent discontent and discomfort.
The market will lead to better quality, lower prices, and a larger quantity of goods –
biggest choice of products (QQP).
Perfect competition is a situation where, on a given market, you have a high number of
market operators producing more or less the same products, having all the same kind of
information (no asymmetry in knowledge), with no barriers of entry, and they all want to win
as many customers as possible. This would produce the optimal QQP. The complete opposite
of this state would be a monopoly. Somewhere in the middle would be an oligopoly.
Competition law is all about creating heaven on earth (creating perfect competition
which does not exist, but we strive for that). Most markets currently are oligopolies. State
monopolies are not existing anymore.
 More recent experience (after 2008 crisis) shows that the theoretical analysis of
competition does not really explain the behaviour of companies in the real world. This in turn
lead many to relativize the importance of free markets and free competition (there needs to be
SOME degree of government regulation). The amount of regulation changes from political
view to political view in current competition policies.
Competition policies do not exist in a societal vacuum and they reflect the
contemporary values of the society. Nowadays, competition policies are geared towards
maximising consumer welfare.1
In a relatively normal product market, we would have producers, distributors, dealers,
and consumers. They are all driven by maximising their profits and having as many customers
as possible so competition occurs and customers are met with the best possible prices with
highest quality products.
Now, men cheats. The more market power I have, the more independently I can operate
from my competitors, the higher I can push my prices, lower the quality and quantity. Market
power means that: the ability to operate independently from one’s rivals.
There are two ways to increase market power: either starting to collude (horizontally2
or vertically – TFEU 101) or abusing a dominant position (TFEU 102).
Let’s say a company invents the vaccine for the Corona virus. As soon as it obtains a
patent, it will have no competitors in that market and can act completely free in terms of quality,
supply, and price. That company can say that in order to buy Corona virus vaccine, consumers
must also purchase aspirin from the same company (tying and bundling).
The third substantive norm of EU competition law flows from the Merger Control
Regulation or the Concentration Control Regulation. It aims to prevent the formation of
dominant positions via mergers and acquisitions.3
The question is, which types of collusion or mergers & acquisitions should be banned?
What is the difference between the use of dominance position, and the abuse of dominance?
The most acknowledged rationale today is consumer protection. If the consumers are
harmed, then a certain business conduct (bilateral, multilateral, unilateral) can be deemed
illegal. Competition law is not concerned with protecting small companies against their larger
competitors. It is about protecting the consumers.
Something that is typical for the EU is that the EU lives within a single market logic
with free movement of goods, services and capital. They are not allowed in principle to raise
barriers against these freedoms. Competition law ensures that the ample environment created
by MMSS by not installing barriers is not undone by private corporations.

1 Some future trends may be using competition law to further green goals (EU Green Deal) or create industrial European
champions.
2 Price fixing (cartels) for example. Let’s say Apple and Samsung agrees on building smartphones which within maximum 2

years are worn out.

3 I.e. it means that if you want to acquire a dominant position, do so by improving the quality of your products and

lowering your prices; not by buying out other companies.

 Lecture 2 – Oligopolies, Institutional Procedures of Competition Law
The situation where the market is led by a few large firms that dominate the market.
Also called concentrated markets.
The structure of the market can either lead to competition or collusion (cartels). Usually
by improving the quality of goods, improving advertising, sales promotions, loyalty schemes
like fidelity cards; these firms will compete with each other.
However, sometimes these firms can illegally coordinate because they think they are
better off by coordinating with each other with price fixing or limiting the output of products.
Why do these firms think they can benefit from collusion? It is explained via game
theory and prisoner’s dilemma. Basically, coordinating and employing lower prices, 2
competing businesses eliminate trust issues explained by the game theory. This coordination
ends up at a point called ‘the Nash Equilibrium’.
Collusions can be either explicit or hidden. Explicit collusions are called cartels and are
prohibited under 101 TFEU. Hidden collusions are not per se prohibited by any measure;
however, it is the job of the Commission to find out about these hidden collusions and tackle
them.
Article 102 also talks about collective abuse which refers to the situation when two or
more undertakings that are connected in any way abuse their concentrated market dominance.
Enforcement (101 and 102 TFEU)
For the enforcement of Articles 101 and 102, the legal sources of the institutional setup
are the Treaties.
Article 119 TFEU: The economic policies of the EU and of the MS are ‘conducted in
accordance with the principle of open market economy and freedom’. This is not a norm; it is
a statement of principle.
Protocol 27: The internal market includes a system ensuring that competition is not
distorted. This protocol creates a link between the internal market and competition. EU
competition law only applies (prohibitions 101 and 102) insofar as the collusion or the abuse
of dominant position affects inter-state trade. For collusions and abuses that stay internal,
national competition authorities such as the Bundeskartellamt or CMA are competent.
Public Enforcement of 101 and 102
Articles 101-105 TFEU: 101 prohibits collusion, 102 prohibits abuses of dominant
position. However, the way to enforce these rules are laid down in Regulations 17/62 and
1/2003. Article 103 TFEU gives a legal basis to the Commission to propose to the Council the
means to enforce the provisions.
“On the basis of a proposal from the Commission, the Council adopts enforcement
rules regarding 101 and 102 after consulting the Parliament.”
National competition authorities, the Commission, national judges and the CJEU
together form an ‘enforcement square’. In addition, the European Court of Human Rights plays
a part.
National competition authorities (NCAs) and the Commission form the administrative
level of the enforcement, whereas the rest form the judicial level.
 The Commission can act on the basis of a complaint from competitors, suppliers or
consumers or ex officio. In addition, there is the leniency procedure whereby an undertaking
‘confess’ their illegal behaviour to the authorities. The Commission can also take over a case
that is being followed by an NCA or a national judge (or vice-versa, Commission can refer
a case to an NCA but the NCA can only request, Commission is not bound to refer).
Finally, Commission can start working on a case if a whistle-blower makes the illegal conduct
known.
The framework for all of these methods is the Regulation 1/2003. There is also
European Competition Network which has no formal decision-making powers but incorporates
the Commission and all 27 competition authorities and publish guidelines, suggestions and
comments.
A case can also be brought before a national judge by a private party either for
injunction or to ask for damages as a result of the violation of 101 or 102. This is what we call
the private enforcement of 101 and 102.
In Regulation 1/2003 the Commission has the right: if the Commission becomes aware
of a case pending before a national judge, it can give its view as amicus curiae on points of
law and points of facts even without asking for permission of intervention. The national judge
can also ask for assistance from the Commission. It can obviously also utilise the preliminary
ruling procedure on points of law.
Any decision of the NCA is subject to the control of the national administrative judge
(right to a legal remedy). Same goes for the Commission, any decision of the Commission is
subject to the scrutiny of CJEU (Union is governed by the rule of law).
When the national judge asks the CJEU for a preliminary ruling, the Commission can
again intervene and give an opinion to the CJEU.
When an NCA examines a case, it can take action against an undertaking because of
violation; or it can reject the complaint. In the latter case, the plaintiff can appeal the decision
in front of national administrative courts. In the former case, the defendant can also appeal the
decision before the national administrative court.
The ECtHR plays a part: when your rights under the ECHR are infringed, you can
appeal to the ECtHR after exhausting the local remedies.
If a case goes through the process of the Commission -> General Court -> ECJ and
there is a decision rendered, can the applicant appeal to Strasbourg? Currently no as the EU is
not a part of the ECHR. You cannot sue the EU before a Court which it is not subject to.
However, via Article 52 of the Charter, the EU has theoretically incorporated the ECHR into
its legal order. There is however a way to challenge the decisions of the CJEU. The parties
who lost the case before the ECJ can bring a case before the Strasbourg Court not against the
EU but against all of its 27 Member States. Nevertheless, the chance of success in such
proceedings is low. The ECHR does not decline jurisdiction but exercises marginal control
as it believes the ECJ already protects the rights adequately.
The Commission has far reaching powers in the European system as it both investigates
a case and also decides on it which involves heavy fines and penalties which can have extensive
effects on not only companies but also consumers and workers. This was criticised and an
alternative method similar to USA system was recommended whereby FTC gathers evidence
on a case and refers it to a Court to decide.
 So in the European system the Commission decides and if a party is not satisfied with
the result they can appeal the decision. However, these appeals can take a long time and late
justice can mean no justice at all. In addition, some of these cases especially in the IT sector
can be very complex. The Commission possesses a huge army to deal with the technicalities,
but the Courts which sit in 3 or 5 judges do not have the adequate power to scrutinise
sufficiently the facts of these cases.
Case Hoffman – La Roche 85/76: one of the first instances of whistle-blowing that
dealt with abuse of dominant position. During the investigation, a Commission official
inadvertently did not remove one of the documents relating to Mr. Adams (the whistle-blower).
This led to the prosecution of Mr Adams in Switzerland which considered such disclosure of
business secrets a criminal offence. He was sentenced to jail and his wife committed suicide as
a result. When he got out, he asked for compensation from the Commission and won a case
with the ECJ. This case illustrates the huge powers and also responsibilities of the Commission.
EC was competent to fine Hoffman – La Roche (a Swiss company) because its conduct has
affected intra-EU trade.
European Commission
The European Commission first establishes the facts. In order to do that, EC first asks
the inquired company for information. The letter starts very kindly, but the ending refers to
1/2003 which says the undertaking is liable to fines if it does not answer the request. The
questions must be of factual nature. The EC has the possibility to enter the business premises
of a company in cooperation with the NCA at any time without any prior notification to the
company (dawn raids).4
The Commission has wide access to documents in these premises. There are exceptions
however such as attorney-client privileged documents. The Commission cannot take a look at
these documents; they are sealed and taken to the General Court who then decides if these
documents are privileged or not.
What about in-house counsel? Once you are in an employer-employee relationship as
a lawyer, the independence and impartiality ends and the attorney-client privilege argument
can no longer be heard.
The Commission has the duty to issue a written statement of objections whereby it
states on which grounds and on which evidence Article 101 and 102 is breached. At this point,
the undertakings concerned get access to the files of the Commission. These companies should
also have the ability to defend themselves and they can request an oral hearing (this is chaired
by a hearing officer in the presence of the legal service and the Committee). In the
statement of objections, the Commission presents the evidence as well as the harm brought to
consumers by the supposedly illegal behaviour. Before the Commission takes any decision, the
Advisory Committee (all 27 NCAs) needs to be consulted.5
The draft decision is adopted by the College of Commissioners on a proposal by DG
Competition.
The Commission can take several decisions:

4 Article 20 and 21 of the Regulation 1/2003.

5 Whether there is a breach of the Treaties and if so, what should be the fine? This concludes the draft decision.
 a) It can conclude that there has indeed been a breach of the Treaties. It will point out
that the undertaking concerned should cease these activities and pay a certain fine.
This is called a prohibition decision.
b) It can also issue a ‘negative clearance’ whereby it basically says the undertaking
did not infringe the Treaties.

c) Leniency: The first company that confesses and gives useful evidence to the
Commission gets full immunity from the fines. The rate of immunity reduces with
each subsequent rat.

d) Commitment Decisions: There are also certain cases where companies concerned
offer commitments through which they undertake to refrain from actions or behave
in a certain way. In return, the Commission makes these commitments legally
binding and it refrains from declaring an infringement has taken place by the parties.
If these binding commitments are breached there may be a fine.6

e) Settlement: Acknowledgement of the breach and payment of a fine through a quick

decision. There is a violation.

Jonathan & Suffrin’s Chapter 2, 13 and 14

Regulation 1/2003 read for the next class

Lecture 3 – Regulation 1/2003 – Public Enforcement Decisions in Detail

PROHIBITION DECISION: Decision usually includes the following. Article 1
typically says there has been a violation. Article 2 says the undertaking should stop this
violation. Article 3 says since the undertaking has violated the Articles, it is liable to the
following fines. Gradually, more and more people such as company stakeholders and
academics has voiced concerns about the fines being so high that the procedure now resembles
criminal law. This makes the procedure fall under the scope of fundamental rights which says
you can only be penalised by a Court, not an administrative body. This was the subject matter
of the Case Menarini.
ECHR has said there are two different spheres of criminal law: the hard core and the
outer space. Competition law enforcement belongs to this outer space with less stringent rules.
When enforcing hard core criminal law you indeed need a judge. The fact that the
administrative body (the Commission) decisions are fully subject to judicial review by Courts,
the ECtHR found no breach of the Convention.
Fines: Article 23 (1) and (2) talks about fines to be imposed. If the company supplies
incorrect or misleading information to the Commission there can be a fine. The paragraph (2)
highlights the fines to be imposed upon an infringement of the Treaty Articles 101 and 102.
There are also numerous Commission ‘soft law’ such as notices, guidelines and implementing
regulations that outline the details of fines.

6Article 7 of the Regulation 1/2003. The advantage of a commitment decision is that the Commission does not have to
prove the existence of an infringement.
 There is a Commission notice on the method of setting fines. Therefore, an undertaking
can see the amount of fine that will be imposed on it if it violates an Article. The Court has
said that these guidelines do not need to be so precise that a company can conduct
risk/reward calculations because it will lose its deterrent effect if a business is able to do this.
A certain degree of ambiguity is for the better.
There is a school of thinking which says administrative fines are useless and criminal
sanctions on managers and employees are excessive. The middle way should be a professional
ban. Those who have been responsible for the infringement should be banned from exercising
their profession for a certain duration of time.
The calculation of fines: The process starts with the establishment of a basic amount.
The basic amount is a proportion of the value of the sales which depends on the degree of
infringement multiplied by the number of years of the infringement. The degree of
infringement is determined on a case-by-case basis with all the facts taken into account. For
example horizontal agreements such as price fixing or limitation of production are considered
to be serious.
The Commission checks if there are aggravating circumstances7, mitigating
circumstances8, and whether there is a specific interest for deterrents.9
There is a legal maximum set for the fines that is 10% of the total turnover of the
undertaking or association of undertakings participating in the infringement.
The ability to pay of companies will also be taken into account; but only in very few
circumstances.10
∞∞∞
Leniency11: There is a notice about leniency. This is only applicable for cartel
arrangements; so only Article 101 infringements. If an undertaking is the first to disclose
information to the Commission which is substantial and adequate to enable the Commission to
carry out an effective investigation; it gets complete immunity from the fines. The leniency
programme only applies BEFORE the Commission starts a procedure.
The second one to disclose info will be subject to another system. The new info must
have a certain added value (something new). This second company can receive reduction on
this basis between 30% - 50%. The third undertaking that provides info with added value can
receive a reduction between 20% - 30%. Any subsequent info can benefit from up to 20%
reduction again depending on the added value.

7 If an undertaking is the role leader in the infringement; repeated behaviour; or refusal to cooperate with the Commission.
8 Cooperation with the Commission; terminating the infringement as soon as the Commission notification arrived; when
the infringement was actually stimulated by public authorities or legislation; substantially limited participation in the
violation.
9 When there is a need to increase the fine so it actually has a deterrent effect, the Commission can increase the fine to

that end. It can also increase the fine if the economic gain supplied by the unlawful act can be determined and the fine
needs to overtake the gains.
10 Such as the 2008 Financial Crisis.
11 The Leniency Notice should be read.
 There is a problem with the leniency programme. In order to benefit from the leniency
programme, you have to provide evidence of a cartel. That information contains lots of secrets
and sensitive data. They will all be in the hands of the Commission. Companies who want to
claim damages might be interested in having access to these information. The question is: since
the confessors know in advance that the info they provide may be disclosed to these claimants,
it would have no incentive to benefit from the leniency programme. The reason is that it will
have to pay the same amount of money or even more for compensation anyway.12 After the
Pfleiderer case, the EU legislators have adopted a Directive13 in which it is stipulated that
documents gathered in leniency proceedings cannot be disclosed to private parties.

SETTLEMENT DECISION: Only applies after the Commission starts an

investigation. The undertaking admits the infringement. The Commission benefits highly from
this because it does not have to go through the whole procedure such as collecting evidence
and dawn raids. The decision of the Commission will include a declaration of the infringement
with a 10% reduction in fines.
COMMITMENT DECISION: Based on Article 7 of the 1/2003. The company
concerned says it is not willing to admit a breach. However, it is willing to undertake certain
actions and commitments that alleviates the concerns of the Commission. In return, the
Commission may accept this and make those commitments legally binding. In the decision
there is no declaration of an infringement.
A national judge is bound by a Commission decision in which it is stated that there is
a violation of EU law. If a decision says Microsoft has abused its dominant position in the
scope of Article 102; the customers of Microsoft can sue Microsoft before a national judge and
claim damages. Normally, they would have to prove the existence of a breach, the causal link,
and the damage itself. However, as the Commission decision is binding on the judge, they only
need to refer to the decision to fulfil all the criteria. Therefore, companies have a big incentive
to go for commitments.
There is a GC case Alrosa whereby a commitment decision of the Commission was
annulled. Companies are sometimes forced by the Commission to come forward with
commitments. The decision was only based on concerns which are less than a violation. The
GC said that mere concerns of an administrative body cannot form the basis of a commitment
decision and this constitutes an abuse of powers by the Commission. In turn, the ECJ has
quashed the GC decision by saying the GC has exceeded the limits of its powers.
Case Menarini: An administrative authority (the Commission) both conducting
investigation of a case as well as issuing decisions is compliant with the ECHR provided that
decisions of that body is subject to a full judicial review by a judicial body. In Regulation
1/2003 we have a provision that shows problematic areas; it is about fines. The provision states
that the General Court has “full jurisdiction” over findings of the Commission. That would
mean the GC can annul, modify, or increase the fines imposed by the Commission without
being in any way bound by its findings. This sounds good on paper. However, these antitrust
cases are usually very intricate and often require complex economic assessments. Commission
is well equipped to carry out these assessments as it has an army of staff. The same cannot be

12
Case C-360/09 Pfleiderer; C-681/11 Schenker, C-226/11 Expedia
13
said for the Courts. Therefore, in practice, the Court rarely is able to devise its own findings
and usually confers on the Commission a wide discretion. In light of this fact, to what degree
can we say the Court exercises full jurisdiction against Commission decisions?
The Charter of the EU is an integral part of the Treaties and bind the EU institutions in
everything they do. They provide a very high level of fundamental rights protection. This is
also intertwined closely with the ECHR as Article 52 of the Charter states that when the Charter
contains rights corresponding to rights offered under the ECHR, the level of protection and
their meaning should be construed as being equal or higher to that provided by the ECHR. In
other words, the Charter confers rights protection at least equal to that conferred by the
ECHR.14
Private Enforcement of Competition Rules
Private enforcement is initiated by private parties who are looking for injunctions and
compensation for damages they have suffered as a result of a competitive breach. The
Commission has come forward with a legislative proposal that facilitates private enforcement
(Directive 2014/104/EU). This directive contains rules governing actions for damages for
infringement of competition rules of the EU and Member States. This Directive was introduced
because there is a high level of relationship between private and public enforcement of
competition rules. The deterrent effect of public enforcement was becoming weaker and
weaker as higher fines did not result in less infringements. This is because undertakings were
only concerned with public fines imposed by the Commission. Since 2014 and Manfredi, the
undertakings are now also afraid of damages they will be liable to pay to victims of their
illegal conduct.
ECJ Case Manfredi (Joined cases C-295/04 & C-298/04) Under EU law, victims are
entitled to full compensation (before their national judges) suffered for damages as a result of
a violation.
In order to successfully claim damages, we need to demonstrate a violation of 101 or
102, a suffered damage, and a causal link between the two. National judges are in principle
bound by the findings of the Commission. Therefore, a victim can invoke a Commission
decision before a national court to prove these three criteria (an Article 7 decision is needed).
That’s why an Article 9 decision (settlement) is very favourable to companies because the
Commission does not acknowledge a violation. In this case, victims need to prove
THEMSELVES these criteria as they cannot rely on a Commission decision (because there
isn’t one confirming an infringement).
The Directive also stipulates MS should make sure that the time limit to claim damages
before a Court must not be less than 5 years. The time frame does not start unless the unlawful
competition act has ceased to exist.
Article 14 of the Directive acknowledges that it can be a commercial practice to pass
on overcharges as a result of price fixing arrangements. In that case, if we suffered damages
we would have to demonstrate these overcharges being mirrored to us as the last consumer
(indirect purchaser). This is a difficult task and therefore the Directive helps these consumers
in providing proof. Accordingly, an indirect consumer will successfully be able to demonstrate
the passing on of an overcharge if they can prove there was a commercial practice between the
defendant (infringer) and the direct purchaser.

14
Oral exam material.
 Lecture 4 (12.03.2020) – Substantive law (Article 101 TFEU) (Chapters IV and V)
Elements of a prohibition:
Undertakings or associations of undertakings / collusion (agreement) / may affect trade
between MS / restrict-prevent-distort competition (the collusion has the object OR the effect
of restricting, distorting, preventing competition in a given market)
Undertakings: any entity which undertakes an economic activity, operates in the
market, supplies goods or services to the market. It does not have to make profit, does not have
to be a legal person, the definition also includes public undertakings. For example, if trade
unions engage in economic activity they are also considered an undertaking. By contrast, if
they are just protecting workers’ rights, they are not subject to competition rules. Public
notaries are state officials, however, as they engage in economic activity they are also subject
to competition rules.
101 is about two or more undertakings colluding, whereas 102 is about unilateral acts.
Collusion: Agreements, decisions of associations, concerted practices. It is a notion
that entails more than a national law contract. There must be between two or more parties some
kind of understanding not to engage in a rivalry process which would otherwise be followed
by them had there been no understanding.
Concerted practices: Co-ordination between undertakings which, without having
reached the stage of concluding a formal agreement, have knowingly substituted practical co-
operation for the risks of competition.
Affecting trade between MS: The effect on inter-state trade can be actual or
potential. For example, a shoe-maker with relatively small means of production concludes a
price fixing agreement with another producer of shoes equally small. Neither of them export
their shoes, they supply the national market. The mere fact that the type of shoes are competing
with imported shoes which they do not produce create a result whereby inter-state trade is
affected. However, the distortion of competition must be to an appreciable extent. The
Commission created legal certainty by producing in 2004 Guidelines on the Notion of Effect
on Trade. There are quantitative criteria laid out therein and if they are met (turnover, market
share etc) one can assume that an agreement does not have an appreciable effect on inter-state
trade. Commission has also said that any case that is brought to its attention whereby these
criteria are met, it will not proceed with an investigation and close the file. This is because
Commission is not competent for antitrust issues that do not relate to the internal market. These
practices will be dealt with NCAs instead. NCAs and national judges who also apply 101 are
not bound by these guidelines but they are inspired by them. This gives undertakings some
legal certainty.
Restriction/distortion/prevention of competition: This means that ultimately, we
need to prove that consumers are somehow harmed as a result of these practices. If consumers
are damaged in some way, then competition is restricted. One of the easiest ways to
demonstrate this is to show price fixing because consumers will pay more money for goods in
this case. However, the Treaty text makes a distinction between object and effect. Why the
Treaty also mentions object? Certain forms of collusion reveal such a degree of harm on
competition which is so serious that there is no need to examine whether they produce actual
or potential effects. Due to the experience of the Commission, the nature of these restrictions
are sufficient to deem them as unlawful against competition rules.
 Horizontal restrictions by object: Price fixing, output limitation, market and/or
customer partitioning.
There is a very important judgment whereby the Court acknowledged this or even went
further by saying that object means effect and there is always the need to prove the effect on
trade.
“A rational decision maker will collect information beginning with what is most
relevant and easy to gather. It will continue until it reaches a point where the marginal cost of
acquiring more information is high and the chance is small that it will make the final decision
more accurate, the rational decision maker will not make any more effort.” Burden of proof
lies on the targeted company when there is a restriction by object. The Commission has to
adhere by the standard similar to criminal law when it comes to proof: beyond any reasonable
doubt.
TFEU 101 (2): The agreements that contravene Article 101 (1) TFEU are null and void.
TFEU 101 (3): However, there is an exemption provision whereby if all the criteria
laid out in Article 101 (3) are met. Before, only the Commission was able to grant exemptions
on a case-by-case basis by evaluating individual exemption applications. But this was very
slow and time consuming so now, every market operator can make this evaluation itself (does
my agreement infringe paragraph I – if it does, does it meet the exemption criteria in paragraph
III) a priori. This paragraph functions like a balancing act. It weighs the negative competitive
effects of the agreement against benefits derived from the agreement. For an exemption to be
applicable, all the criteria need to be met. There are a lot of guidelines as well as Block
Exemption Regulations (“BER”) published by the Commission to help undertakings self-
evaluate their conduct. For example, intellectual property licensing (know-how transfers)
agreements are widely covered by the Commission. Those intellectual property licensing
agreements that do not fall under the scope of the (BER) are self-evaluated by companies in
accordance with the Guidelines published by the Commission.
The 3rd way of escaping 101 (1): Certain agreements restricting competition which fulfil
the conditions of 101 (1) and cannot be exempted under paragraph III are still okay if they
serve a certain public policy objective and they are proportionate to achieve their stated goals
(Case Wouters CJEU). Dutch Bar of Lawyers have prohibited lawyers merging with
accountants. CJEU has justified the violation of Article 101 (1) on grounds of public interest.
The prime role of an attorney is representing his/her client; a subjective work. An accountant,
on the other hand, undertakes objective work whereby he/she prepares accounts. The Court has
said that someone who needs to act subjectively cannot work together with someone who needs
to work objectively. Therefore, the Court upheld the decision of the Bar prohibiting the merger
between lawyers and accountants even though it violated competition.
The rule of reason method to escape 101 (1): If two parties collude in the sense that
they restrict their conduct of business, it does not necessarily mean there is a restriction of
competition. Sometimes, certain restrictions are necessary to allow competition to rise. Let’s
say you have found the vaccine to corona virus. You go to GlaxoSmithKline to offer them the
licence. They say that they need to create lots of supply lines, chains and production facilities
to get started and they will not be willing to do it if you are here competing with them.
Therefore, you partition the market and promise to GSK that you will not provide the licence
to anybody else in the European market. The CJEU has said that these restrictions are ancillary
or “upfront”compared to the creation of the market; because if you do not install these
restrictions then there will be no market at all. (object and effect/documents to be
circulated/BER regarding know-how transfer agreements and de minimis notice)
 Lecture V
Let’s assume that there is an effect on competition, then you are caught in principle, but
you can say that these effects would also occur had there been no agreement at all. You present
the counterfactual agreement. The illegal conduct is acknowledged but it can be demonstrated
that in the absence of this conduct the competitive results would still be the same. The classic
view was, if you are caught by 101 (1), then there is still an escape route which is 101 (3) in
the form of exemptions. You could rely on individual exemptions given on a case-by-case basis
by the Commission or Block Exemption Regulations.
Facts of the case CJEU Generics UK C-307/18: What happens now in practice is the
line between 101 (1) and 101 (3) is not so clear anymore. This was heavily implied in Generics
UK case. Why was this case important?
It is about a litigation between GlaxoSmithKline (GSK) which had a patent that expired
and producers of the drug’s generic variant (Generics UK and others – “GUK”). They started
to market the generic variant and subsequently were sued by GSK because it did not share the
same view as the GUK about the validity of the patent, therefore concluding that GUK has
infringed its patent rights. In the end, parties decided to settle the case whereby GUK has
undertaken not to enter into the market, in return, GSK has undertaken to supply these generic
producers with a limited amount of the same drug for them to sell. Let’s take a look at the
counterfactual side of this case. If the case was not settled, there would be two alternative
outcomes. If the GSK was found right, they would continue to be the sole producer of the drug
because of the protection of the patent. On the other hand, if the GUK won, then they would
be able to lawfully enter the market and the market would have more than one active player.
So, is this an agreement which restricts competition by object? That was the (main)
question referred for a preliminary ruling to the CJEU. The Opinion of the AG Kolkott made
it very clear the conditions about whether a conduct can be considered anticompetitive by
object. As regards whether it is relevant to take into account the pro-competitive benefits of an
agreement, the opinion makes it clear that there is no automation. This means that, once you
claim there are also pro-competitive effects, the question does not automatically become the
assessment of infringement by effect. Even if a claim has been made about pro-competitive
effects, we still need to look at anti-competitiveness by object as well.
Practical relevance of the judgment: This judgment confirms clearly that when we
have to determine a violation of 101 (1) we have to engage in a similar balancing act (between
pro and anti-competitive effects of the conduct) just like we do in 101 (3) assessments. This
practically means that the assessment made by the Court or the Commission under 101 (1) and
101 (3) continue to become closer and closer. AG has demonstrated this by saying that: the
existence of pro-competitive effects can affect and possibly remove the very existence of an
infringement under 101 (1). In other words, a conduct can have such a substantial amount of
pro-competitive effects that it would be inappropriate to conclude an infringement under 101
(1). (AG Kolkott’s Opinion on Generics UK Case C-307/18 para. 149).

Lecture VI (19/03/2020) – TFEU 102 Abuses of dominant position

Article 102 is criticised because it creates a lot of legal uncertainty since it is very short.
This means that the distinction between the lawful use of dominant position and the abuse of it
does not follow from the text of the Treaty. Rather, we need to take a look at the case-law of
the CJEU and Commission decisions, as well as guiding material provided by the Commission.
TFEU 102 only provides for a prohibition with examples. No exemption/weighing of pros and
cons was mentioned explicitly. However, case-law suggests that there may be certain pro-
competitive effects of the abusive conduct and we can weigh pros and cons of the conduct.
Components required to activate 102 TFEU: Existence of a dominant position + abuse
of that dominance + this action must result in hampering intra-EU trade
Definition of a dominant position: When a company is so strong it can basically ignore
its suppliers, competitors, customers etc. i.e. When an undertaking, owing to its economic
strength in a respective market, can act, to an appreciable extent, independently of its
competitors and other players in the market, effectively preventing or distorting competition
(Case United Brands CJEU 27/76).
How can dominance occur in markets?: Abuse is an objective notion. It influences the
structure of the market, and as a result of the conduct of this dominant undertaking,
competition is already weakened, and the maintenance of the remaining competition is
severely more difficult as a consequence (CJEU 27/76). Commission has clarified that there
is a presumption of dominance (which can be rebutted by other factors) if an undertaking
controls more than 50% of the market share. Market share can be absolute (more than 50%)
or relative (to other players – if everyone owns 5% but you own 30% you are relatively
dominant in that market). As a producer, if you control the distribution chain strictly, you
will have advantage over your competitors. Intellectual property (patents, copyright,
trademarks) which grant exclusive rights can pave the way for dominant positions.
Operational strength by means of infrastructure, which requires huge investments, can create
dominant positions. Barriers to entry can make incumbent undertakings more powerful as
well.
Quod licet lovi, non licet bovi: A dominant company can be prohibited from carrying
out certain actions as there are several obligations imposed on these undertakings (they need
to act more vigilantly).
When does a normal business conduct becomes abusive? Basically, you have to
compete on the basis of your objective merits. If you are dominant, and you increase your
market share by being more efficient than your competitors, there is nothing wrong with that.
You have to behave as the most efficient competitor would behave in a similar situation. For
instance, you lower prices, you increase the quality of your products, you spend a lot on R&D.
At the end of the day, competition law is not there to protect the smaller competitor (survival
of the fittest). However, the situation becomes different if an undertaking uses its dominance
to make the life of its competitors more difficult. There, we make a distinction between two
types of abuse: exclusionary and exploitative. Exploitative abuses15 directly affect the
customers of the dominant firm, whereas exclusionary abuses16 directly affect competitors and
indirectly, customers.
An example of an exclusionary abuse is dumping (also known as predatory pricing).
Products are sold below their cost, knowing very well that it is also below the cost of competing

15
When a company with a dominant position charges excessive prices, starts to discriminate between its
customers without an objective justification (for example charging lower prices for fidelity commitments),
plays with innovation (Apple making older iPhone’s slow and break down or holding back their advanced
technology).
16
A dominant company refusing a request for an essential licensing (careful assessment needed – C-418/01
IMS Health).
products. Since the dominant companies are strong, they can carry on until they have exhausted
the competing companies. These small companies cannot compete with such low prices and
will eventually quit the market. At the end, the dominant firm will suffer some damages at first
(which it can handle) but when the competitors are eliminated, it will emerge stronger than
before. Tying and bundling of products also constitutes an exclusionary practice. Microsoft in
the past has artificially forced customers who bought Windows to also buy their software as a
condition (they tied the sale of Windows to the sale of another software) (CJEU T-201/04
Microsoft).